Starling Oncology, Inc.: Form 10-Q for the period ended Sep 30, 2023
Filed with the SEC on Nov 8, 2023 and accepted by EDGAR at Nov 8, 2023, 16:43 ET.
Management's discussion and analysis
As filed, 55,203 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of The Oncology Institute, Inc. ("TOI") along with its consolidating subsidiaries (the "Company"). The discussion should be read together with the unaudited condensed consolidated financial statements and the related notes that are included elsewhere in this Report. The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. Such statements are based upon current expectations, as well as management's beliefs and assumptions and involve a high degree of risk and uncertainty. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Statements that include the words "believes," "anticipates," "plans," "expects." "intends," and similar expressions that convey uncertainty of future events or outcomes are forward-looking statements. Our actual results could differ materially from those discussed or suggested in the forward-looking statements herein. Factors that could cause or contribute to such differences include those described under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022 and in our Quarterly Report on Form 10-Q for the three months ended March 31, 2023. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements in this document are based on information available to us as of the filing date of this Quarterly Report on Form 10-Q and we assume no obligation to update any forward-looking statements or the reasons why our actual results may differ. All dollar values are expressed in thousands, unless otherwise noted.
Overview
The Company is a leading value-based oncology company that manages community-based oncology practices that serve patients at 84 clinic locations across 15 markets and five states throughout the United States. Our community-based oncology practices are staffed with 123 oncologists and advanced practice providers. 70 of these clinics are staffed with 112 providers employed or contracted by our affiliated physician-owned professional corporations, referred to as the "TOI PCs", which provided care for more than 64,000 patients in 2022 and managed a population of approximately 1.8 million patients under value-based agreements as of September 30, 2023. The Company also provides management services on behalf of 14 clinic locations owned by independent oncology practices. The Company's mission is to heal and empower cancer patients through compassion, innovation, and state-of-the-art medical care.
Operationally, the Company’s medical centers provide a complete suite of medical oncology services including: physician services, in-house infusion and pharmacy, clinical trials, radiation, educational seminars, support groups, counseling, and 24/7 patient assistance. Many of our services, such as managing clinical trials, palliative care programs and stem cell transplants, are traditionally accessed through academic and tertiary care settings, while the TOI PCs bring these services to patients in a community setting. As scientific research progresses and more treatment options become available, cancer care is shifting from acute care episodes to chronic disease management. With this shift, it is increasingly important for high-quality, high-value cancer care to be available in a local community setting to all patients in need.
As a value-based oncology company, the Company seeks to deliver both better quality care and lower cost of care. The Company works to accomplish this goal by reducing wasteful, inefficient or counterproductive care that drives up costs but does not improve outcomes. The Company believes payors and employers are aligned with the value-based model due to its enhanced access, improved outcomes, and lower costs. Patients under the Company's affiliated providers’ care can benefit from evidence-based and personalized care plans, gain access to sub-specialized care in convenient community locations, and lower out-of-pocket costs. The Company believes its affiliated providers enjoy the stability and predictability of a large multi-state practice, are not incentivized or pressured to overtreat when it may be inconsistent with a patient’s goals of care, and can focus on practicing outstanding evidence-based medicine, rather than business building.
The Business Combination
On June 28, 2021, DFP Healthcare Acquisition Corp. ("DFPH"), Orion Merger Sub I, Inc. ("First Merger Sub") and Orion Merger Sub II, LLC ("Second Merger Sub") entered into an agreement and plan of merger ("Merger Agreement") with The Oncology Institute, LLC ("TOI LLC") (which was formerly known as TOI Parent, Inc.) (collectively, the "Business Combination"). In connection with the Business Combination, DFPH entered into subscription agreements with certain investors (the “PIPE Investors”), whereby it issued 17.5 million shares of common stock at $10.00 per share and 100,000 shares of preferred stock at $1,000.00 per share (“PIPE Shares”) for an aggregate investment of $275,000 (“PIPE Investment”), which closed simultaneously with the consummation of the Business Combination.
The Business Combination closed on November 12, 2021 ("Closing Date"). On the Closing Date, (i) First Merger Sub merged with and into the former TOI Parent, Inc., with the former TOI Parent, Inc. being the surviving corporation and (ii)
immediately following, the former TOI Parent, Inc. merged with and into Second Merger Sub ("Legacy TOI"), with Second Merger Sub being the surviving entity and a wholly owned subsidiary of DFPH. DFPH was renamed “The Oncology Institute, Inc.” and TOI Common Stock and Public Warrants continued to be listed on Nasdaq under the ticker symbols “TOI” and “TOIIW,” respectively.
The total merger consideration on the Closing Date was $762,052, consisting of 51.3 million shares of common stock, valued at $10.00 per share (aggregate $595,468, inclusive of shares of DFPH common stock issuable per restricted stock units and the exercise of Legacy TOI stock options), and $166,584 in cash. Legacy TOI also issued 12.5 million shares of common stock pursuant to the terms of an earnout (“Earnout Shares”). The earnout shares are allocable to both Legacy TOI stockholders and Legacy TOI option holders. On the Closing Date, shares of DFPH common stock that were not otherwise redeemed as part of the DFPH public stockholder vote and the PIPE Shares automatically converted into shares of TOI stock on a one-for-one basis.
The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. generally accepted accounting principles (“U.S. GAAP"). Under this method of accounting, DFPH was treated as the “acquired” company for accounting purposes and the Business Combination was treated as the equivalent of Legacy TOI issuing stock for the net assets of DFPH, accompanied by a recapitalization. The net assets of DFPH are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination were those of Legacy TOI.
Components of Results of Operations
Revenue
The Company receives payments from the following sources for services rendered: (i) commercial insurers; (ii) pharmacy benefit managers (“PBMs”), (iii) the federal government under the Medicare program administered by the Centers for Medicare and Medicaid Services (“CMS”); (iv) state governments under Medicaid and other programs; (v) other third-party payors and managed care organizations (e.g., risk bearing organizations and independent practice associations (“IPAs”)); and (vi) individual patients and clients.
Revenue primarily consists of capitation revenue, fee-for-service (“FFS”) revenue, dispensary revenue, and clinical trials revenue. Capitation and FFS revenue comprise the revenues within the Company’s patient services segment and are presented together in the results of operations. The following paragraphs provide a summary of the principal forms of our billing arrangements and how revenue is recognized for each type of revenue.
Capitation
Capitation revenues consist primarily of fees for medical services provided by the TOI PCs to the Company's patients under a capitated arrangement with various managed care organizations. Capitation revenue is paid monthly based on the number of enrollees by the contracted managed care organization (per member per month or “PMPM”). Capitation contracts generally have a legal term of one year or longer. Payments in capitation contracts are variable since they primarily include PMPM fees associated with unspecified membership that fluctuates throughout the term of the contract; however, based on our experience, our total underlying membership generally increases over time as penetration of Medicare Advantage products grows. Certain contracts include terms for a capitation deduction where the cost of out-of-network referrals of members are deducted from the future payment. Revenue is recognized in the month services are rendered on the basis of the transaction price established at that time.
Fee-for-service revenue
FFS revenue represents revenue earned under contracts in which we bill and collect for medical services rendered by the TOI PCs’ employed physicians. The terms for FFS contracts are short in duration and only last for the period over which services are rendered (typically, one day). FFS revenue consists of fees for medical services provided to patients. As specialist providers, our FFS revenue is dependent on referrals from other physicians, such as primary care physicians. The Company's affiliated providers build trusted, professional relationships with these physicians and their associated medical groups, which can lead to recurring FFS volume; however, this volume is subject to numerous factors the Company cannot control and can fluctuate over time. The Company also receives FFS revenue for capitated patients that receive medical services which are excluded from the Company's capitation contracts. Under the FFS arrangements, third-party payors and patients are billed for patient care services provided by the TOI PCs. Payments for services provided are generally less than billed charges. The Company records revenue net of an allowance for contractual adjustments, which represents the net revenue expected to be collected from third-party payors (including managed care, commercial, and governmental payors such as Medicare and Medicaid), and patients. These expected collections are based on fees and negotiated payment rates in the case of third-party payors, the specific benefits provided for under each patient’s healthcare plan, mandated payment rates in the case of Medicare and Medicaid programs, and historical cash collections (net of recoveries). The recognition of net revenue (gross charges less contractual allowances) from such services is dependent on certain factors, such as the proper completion of medical charts following a patient visit, the forwarding of such charts to our billing center for medical coding and entering into the Company's billing system, and the verification of each patient’s submission or representation at the time services are rendered as to the payor(s) responsible for payment of such services. Revenue is recorded on the date the services are rendered based on the information known at the time of entering of such information into the Company's billing systems as well as an estimate of the revenue associated with medical services.
Dispensary
Oral prescription drugs prescribed by doctors to their patients are sold directly through the TOI PCs’ dispensaries. Revenue for the prescriptions is based on fee schedules set by various PBMs and other third-party payors. The fee schedule is often subject to direct and indirect remuneration (“DIR”) fees, which are based primarily on pre-established metrics. DIR fees may be assessed in the periods after payments are received against future payments. The Company recognizes revenue, deducted by estimated DIR fees, at the time the patient takes possession of the oral drug.
Clinical trials & other revenue
The TOI PCs also enter into contracts to perform clinical research trials. The terms for clinical trial contracts last many months as the clinical research is performed. Each contract represents a single, integrated set of research activities that are satisfied over time as the output of results from the trial is captured for the trial sponsor to review. Under the clinical trial contracts, the TOI PCs receive a fixed payment for administrative, set-up, and close-down fees; a fixed amount for each patient site visit; and certain expense reimbursements. The Company recognizes revenue for these arrangements on the fees earned to date based on the state of the trial, as established under contract with the customer.
Operating Expenses
Direct costs - patient services
Direct costs - patient services primarily includes chemotherapy drug costs, clinician salaries and benefits, and medical supplies. Clinicians include oncologists, advanced practice providers such as physician assistants and nurse practitioners, and registered nurses employed by the TOI PCs.
Direct costs - dispensary
Direct costs - dispensary primarily includes the cost of oral medications dispensed in the TOI PCs’ clinic locations.
Direct costs - clinical trials & other
Direct costs - clinical trials & other primarily includes costs related to clinical trial contracts and medical supplies.
Selling, general and administrative expense
Selling, general and administrative expenses include employee-related expenses, including both clinic and field support staff as well as central administrative and corporate staff. These expenses include salaries and related costs and stock-based compensation for our executives and physicians. The Company's selling, general and administrative expenses also includes occupancy costs, technology infrastructure, operations, clinical and quality support, finance, legal, human resources, and business development. Following the consummation of the Business Combination, general and administrative expenses have increased, and the Company expects continued increases over time, due to the additional legal, accounting, insurance, investor relations and other costs that the Company incurs as a public company, as well as other costs associated with continuing to grow the business. While the Company expects its selling, general and administrative expenses to increase in absolute dollars in the foreseeable future. such expenses are on average expected to decrease as a percentage of revenue over the long term.
Results of Operations
The following table sets forth our Condensed Consolidated Statements of Operations data expressed as a percentage of total revenues for the periods indicated. The Company’s management is not aware of material events or uncertainties that would cause the financial information below to not be indicative of future operating results or results of future financial condition.
| Revenue | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 | |
|---|---|---|---|---|---|
| Patient services | 65.3% | 68.7% | 65.9% | 65.6% | |
| Dispensary | 32.7% | 29.0% | 32.0% | 31.9% | |
| Clinical trials & other | 2.0% | 2.3% | 2.1% | 2.5% | |
| Total operating revenue | 100.0% | 100.0% | 100.0% | 100.0% | |
| Operating expenses | |||||
| Direct costs – patient services | 54.8% | 55.6% | 55.6% | 53.2% | |
| Direct costs – dispensary | 25.7% | 24.2% | 25.3% | 26.4% | |
| Direct costs – clinical trials & other | —% | 0.2% | 0.1% | 0.3% | |
| Goodwill impairment charges | —% | —% | 7.1% | —% | |
| Selling, general and administrative expense | 34.4% | 49.2% | 36.0% | 49.8% | |
| Depreciation and amortization | 2.1% | 1.7% | 1.8% | 1.8% | |
| Total operating expenses | 117.0% | 130.9% | 130.9% | 125.9% | 131.5% |
| Loss from operations | (17.0)% | (30.9)% | (25.9)% | (31.5)% | |
| Other non-operating expense (income) | |||||
| Interest expense | 3.3% | 2.3% | 3.4% | 0.9% | |
| Interest income | (1.1)% | —% | (1.3)% | —% | |
| Change in fair value of derivative warrant liabilities | 0.2% | 0.2% | —% | (0.2)% | |
| Change in fair value of earnout liabilities | —% | (5.5)% | (0.3)% | (29.6)% | |
| Change in fair value of conversion option derivative liabilities | 1.6% | (23.9)% | (0.9)% | (8.6)% | |
| Gain on debt extinguishment | —% | —% | —% | (0.1)% | |
| Other, net | 0.2% | 0.1% | 0.2% | 0.1% | |
| Total other non-operating loss (income) | 4.2% | (26.8)% | 1.1% | (37.5)% | |
| (Loss) income before provision for income taxes | (21.2)% | (4.1)% | (27.0)% | 6.0% | |
| Income tax (expense) benefit | (0.2)% | —% | (0.1)% | (0.1)% | |
| Net (loss) income | (21.4)% | (4.1)% | (27.1)% | 5.9% |
Comparison of the Three and Nine Months Ended September 30, 2023 and 2022
Revenue
(dollars in thousands)
| Three Months Ended September 30, 2023 | 2022 | Change $% | Nine Months Ended September 30, 2023 | 2022 | Change $% | |||
|---|---|---|---|---|---|---|---|---|
| Patient services | $53,634 | $44,627 | $9,007 | 20.2% | $157,333 | $118,793 | $38,540 | 32.4% |
| Dispensary | 26,792 | 18,839 | 7,953 | 42.2% | 76,228 | 57,736 | 18,492 | 32.0% |
| Clinical trials & other | 1,609 | 1,511 | 98 | 6.5% | 4,890 | 4,530 | 360 | 7.9% |
| Total operating revenue | $82,035 | $64,977 | $17,058 | 26.3% | $238,451 | $181,059 | $57,392 | 31.7% |
Patient services
Three months ended September 30, 2023 and 2022
The increase in patient services revenue was primarily due to a 16.2% increase in FFS revenue as a result of a practice acquisition and an overall increase in clinic count as well as a 3.3% increase in capitation revenue .
Nine Months Ended September 30, 2023 and 2022
The increase in patient services revenue was primarily due to a 27.2% increase in FFS revenue as a result of a practice acquisition and an overall increase in clinic count as well as a 4.6% increase in capitation revenue .
Dispensary
Three Months Ended September 30, 2023 and 2022
The increase in dispensary revenue was primarily due to a 29.6% increase in the number of prescriptions filled, and a 9.7% increase in the average revenue per fill.
Nine Months Ended September 30, 2023 and 2022
The increase in dispensary revenue was primarily due to a 33.9% increase in the number of prescriptions filled, offset by a 1.4% decrease in the average revenue per fill.
Clinical trials & other
Three Months Ended September 30, 2023 and 2022
The increase in clinical trials and other revenue was primarily due to an increase in California Proposition 56 supplemental payments and other revenue compared to the same quarter in the prior year for the three and nine months ended September 30, 2023 and 2022.
Nine Months Ended September 30, 2023 and 2022
The increase in clinical trials and other revenue was primarily due to an increase in California Proposition 56 supplemental payments and other revenue compared to the same quarter in the prior year for the three and nine months ended September 30, 2023 and 2022.
Operating Expenses
(dollars in thousands)
| Three Months Ended September 30, 2023 | 2022 | Change $% | Nine Months Ended September 30, 2023 | 2022 | Change $% | |||
|---|---|---|---|---|---|---|---|---|
| Direct costs – patient services | $44,961 | $36,126 | $8,835 | 24.5% | $132,653 | $96,379 | $36,274 | 37.6% |
| Direct costs – dispensary | $21,072 | $15,738 | $5,334 | 33.9% | $60,328 | $47,816 | $12,512 | 26.2% |
| Direct costs – clinical trials & other | $24 | $113 | $(89) | (78.8)% | $276 | $400 | $(124) | (31.0)% |
| Goodwill impairment charges | $— | $— | $— | N/A | $16,867 | $— | $16,867 | N/A |
| Selling, general and administrative expense | $28,205 | $31,963 | $(3,758) | (11.8)% | $85,761 | $90,117 | $(4,356) | (4.8)% |
| Depreciation and amortization | $1,698 | $1,134 | $564 | 49.7% | $4,296 | $3,219 | $1,077 | 33.5% |
| Total operating expenses | $95,960 | $85,074 | $10,886 | 12.8% | $300,181 | $237,931 | $62,250 | 26.2% |
Patient services cost
Three Months Ended September 30, 2023 and 2022
The increase in patient services cost was primarily due to a 20.5% increase in intravenous drug costs, driven by the Company's patient mix and volume, as well as 7.0% increase in clinical payroll costs due to the growth in clinic count.
Nine Months Ended September 30, 2023 and 2022
The increase in patient services cost was primarily due to a 30.7% increase in intravenous drug costs, driven by the Company's patient mix and volume, as well as 7.9% increase in clinical payroll costs due to the growth in clinic count.
Dispensary cost
Three Months Ended September 30, 2023 and 2022
The increase in dispensary cost was primarily due to a 29.6% increase in the number of prescriptions filled and a 3.3% increase in the average cost of the prescriptions filled.
Nine Months Ended September 30, 2023 and 2022
The increase in dispensary cost was primarily due to a 33.9% increase in the number of prescriptions filled, offset by a (5.8)% decrease in the average cost of the prescriptions filled.
Goodwill impairment charges
During the three and nine months ended September 30, 2023, impairment charges of $0 and $16,867, respectively, were recorded related to goodwill. See Note 18 for additional detail.
Selling, general and administrative expense
Three Months Ended September 30, 2023 and 2022
The decrease in selling, general and administrative expense was primarily driven by a decrease in share-based compensation expense of 5.9%, a decrease in deferred purchase price of 5.3% and a decrease in transaction costs of 2.8%, offset by a 1.7% increase to salaries and benefits, a 1.2% increase to real estate and development, and a 2.1% increase in office expenses related to the continued growth of our business.
Nine Months Ended September 30, 2023 and 2022
The decrease in selling, general and administrative expense was primarily driven by a decrease in share-based compensation expense of 8.7% and a decrease in transaction costs of 3.4%, offset by a 3.4% increase to salaries and benefits, a 1.7% increase to real estate and development, and a 3.6% increase in office expenses related to the continued growth of our business.
Other Expenses (Income)
(dollars in thousands)
| Three Months Ended September 30, 2023 | 2022 | Change $% | Nine Months Ended September 30, 2023 | 2022 | Change $% | |||
|---|---|---|---|---|---|---|---|---|
| Interest expense | $2,695 | $1,497 | $1,198 | 80.0% | $8,017 | $1,632 | $6,385 | 391.2% |
| Interest income | (940) | — | $(940) | N/A | (3,181) | — | $(3,181) | N/A |
| Change in fair value of derivative warrant liabilities | 203 | 159 | 44 | 27.7% | (58) | (445) | 387 | (87.0)% |
| Change in fair value of earnout liabilities | (23) | (3,581) | 3,558 | (99.4)% | (792) | (53,821) | 53,029 | (98.5)% |
| Change in fair value of conversion option derivative liabilities | 1,284 | (15,510) | 16,794 | N/A | (2,034) | (15,510) | 13,476 | N/A |
| Gain on debt extinguishment | — | — | — | N/A | — | (183) | 183 | N/A |
| Other, net | 140 | 36 | 104 | 288.9% | 354 | 172 | 182 | 105.8% |
| Total other non-operating expense (income) | $3,359 | $(17,399) | $20,758 | (119.3)% | $2,306 | $(68,155) | $70,461 | (103.4)% |
51
Interest expense
Three Months Ended September 30, 2023 and 2022
The increase in interest expense was the result of interest and amortization related to the Senior Secured Convertible Note during the second quarter of 2023.
Nine Months Ended September 30, 2023 and 2022
The increase in interest expense was the result of interest and amortization related to the Senior Secured Convertible Note during the first half of 2023.
Interest income
Three Months Ended September 30, 2023 and 2022
The increase in interest income was the result of investments in marketable securities during the second quarter of 2023.
Nine Months Ended September 30, 2023 and 2022
The increase in interest income was the result of investments in marketable securities during the first half of 2023.
Change in fair value of liabilities
Three Months Ended September 30, 2023 and 2022
The increase in non-operating (income) expense was primarily due to loss of $1,284 as a result of increase in the fair value of conversion option derivative liabilities for the three months ended September 30, 2023, compared to a gain of $3,581 as a result of a decrease in the fair value of earnout liabilities and a gain of $15,510 as a result of a decrease in fair value of derivative warrant liabilities for the three months ended September 30, 2022.
Nine Months Ended September 30, 2023 and 2022
The increase in non-operating (income) expense was primarily due to gains of $792 and $2,034, respectively, as a result of decreases in the fair value of earnout liabilities and conversion option derivative liabilities for the nine months ended September 30, 2023, compared to a gain of $53,821 as a result of a decrease in the fair value of earnout liabilities for the nine months ended September 30, 2022.
Gain on loan forgiveness
There was no gain on loan forgiveness during the three and nine months ended September 30, 2023. For the three and nine months ended September 30, 2022, gain on loan forgiveness of $0 and $183, respectively, was the result of a CARES Act loan that was acquired as part of a physician practice acquisition and subsequently forgiven.
Other, net
The change in other, net was primarily due to unrealized gains on marketable securities and related accretion that did not occur in the prior year.
Key Business Metrics
In addition to our financial information, the Company's management reviews a number of operating and financial metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans, and make strategic decisions.
| Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 | |
|---|---|---|---|---|
| Clinics (1) | 84 | 74 | 84 | 74 |
| Markets | 15 | 14 | 15 | 14 |
| Lives under value-based contracts (millions) | 1.8 | 1.7 | 1.8 | 1.7 |
| Adjusted EBITDA (in thousands) (2) | $(5,350) | $(6,744) | $(19,558) | $(18,902) |
(1) Includes independent oncology practices to which we provide limited management services, but do not bear the operating costs.
(2) Adjusted EBITDA is a "non-GAAP" financial measure within the meaning of Item 10 of Regulation S-K promulgated by the SEC. The Company defines Adjusted EBITDA as net income (loss) adjusting for:
- Depreciation and amortization,
- Interest expense, net,
- Income tax expense,
- Non-cash addbacks,
- Share-based compensation,
- Goodwill impairment charges
- Changes in fair value of liabilities,
- Unrealized (gains) losses on investments
- Practice acquisition-related costs,
- Post combination compensation expense,
- Consulting and legal fees,
- Infrastructure and workforce costs, and
- Transaction costs.
The Company includes Adjusted EBITDA because it is an important measure which our management uses to assess the results of operations, to evaluate factors and trends affecting the business, and to plan and forecast future periods.
Management believes that this measure provides an additional way of viewing aspects of the Company's operations that, when viewed with the GAAP results, provides a more complete understanding of the Company's results of operations and the factors and trends affecting the business. However, non-GAAP financial measures should be considered a supplement to, and not as a substitute for, or superior to, the corresponding measures calculated in accordance with U.S. GAAP. Non-GAAP financial measures used by management may differ from the non-GAAP measures used by other companies, including the Company's competitors. Management encourages investors and others to review the Company's financial information in its entirety, not to rely on any single financial measure.
The following tables provide a reconciliation of net income (loss), the most closely comparable GAAP financial measure, to Adjusted EBITDA:
(dollars in thousands)
| Three Months Ended September 30, 2023 | 2022 | Change $% | ||
|---|---|---|---|---|
| Net loss | $(17,419) | $(2,674) | $(14,745) | 551.4% |
| Depreciation and amortization | $1,698 | $1,134 | $564 | 49.7% |
| Interest expense, net | $1,755 | $1,498 | $257 | 17.2% |
| Income tax expense (benefit) | $135 | $(25) | $160 | (640.0)% |
| Non-cash addbacks(1) | $(14) | $299 | $(313) | (104.7)% |
| Share-based compensation | $4,657 | $6,546 | $(1,889) | (28.9)% |
| Changes in fair value of liabilities | $1,464 | $(18,932) | $20,396 | (107.7)% |
| Unrealized (gains) losses on investments | $(157) | $33 | $(190) | (575.8)% |
| Practice acquisition-related costs(2) | $41 | $166 | $(125) | (75.3)% |
| Post-combination compensation expense(3) | $399 | $2,088 | $(1,689) | (80.9)% |
| Consulting and legal fees(4) | $1 | $883 | $(882) | (99.9)% |
| Infrastructure and workforce costs(5) | $1,978 | $1,239 | $739 | 59.6% |
| Transaction costs(6) | $112 | $1,001 | $(889) | (88.8)% |
| Adjusted EBITDA | $(5,350) | $(6,744) | $1,394 | (20.7)% |
(1) During the three months ended September 30, 2023, non-cash addbacks were primarily comprised of non-cash rent of $45 and net reversal of bad debt recovery of $32. During the three months ended September 30, 2022, non-cash addbacks were primarily comprised of reversals of bad debt recoveries of $143 and non-cash rent of $148.
(2) Practice acquisition-related costs were comprised of consulting and legal fees incurred to perform due diligence, execute, and integrate acquisitions of various oncology practices.
(3) Deferred consideration payments for practice acquisitions that are contingent upon the seller’s future employment at the Company.
(4) Consulting and legal fees were comprised of a subset of the Company’s total consulting and legal fees, and related to certain advisory projects during the three months ended September 30, 2023. During the three months ended September 30, 2022, these fees related to advisory projects, software implementations, and legal fees for debt financing and predecessor litigation matters.
(5) Infrastructure and workforce costs were comprised of recruiting expenses to build out corporate infrastructure of $701 and $798, software implementation fees of $37 and $31, severance expenses resulting from cost rationalization programs of $633 and $117, temporary labor of $310 and $291, and miscellaneous expense EBITDA addback of $295 and $0 during the three months ended September 30, 2023 and 2022, respectively.
(6) Transaction costs incurred during the three months ended September 30, 2023 were comprised of consulting, legal, administrative and regulatory fees associated with share repurchases
(dollars in thousands)
| Nine Months Ended September 30, 2023 | 2022 | Change $% | ||
|---|---|---|---|---|
| Net (loss) income | $(64,314) | $11,159 | $(75,473) | (676.3)% |
| Depreciation and amortization | $4,296 | $3,219 | $1,077 | 33.5% |
| Interest expense, net | $4,836 | $1,633 | $3,203 | 196.1% |
| Income tax expense | $278 | $124 | $154 | 124.2% |
| Non-cash addbacks(1) | $153 | $604 | $(451) | (74.7)% |
| Share-based compensation | $13,731 | $21,612 | $(7,881) | (36.5)% |
| Goodwill impairment charges | $16,867 | $— | $16,867 | N/A |
| Changes in fair value of liabilities | $(2,884) | $(69,776) | $66,892 | (95.9)% |
| Unrealized (gains) losses on investments | $(31) | $33 | $(64) | (193.9)% |
| Practice acquisition-related costs(2) | $112 | $699 | $(587) | (84.0)% |
| Post-combination compensation expense(3) | $1,562 | $2,088 | $(526) | (25.2)% |
| Consulting and legal fees(4) | $1,515 | $2,682 | $(1,167) | (43.5)% |
| Infrastructure and workforce costs(5) | $4,181 | $3,826 | $355 | 9.3% |
| Transaction costs(6) | $140 | $3,195 | $(3,055) | (95.6)% |
| Adjusted EBITDA | $(19,558) | $(18,902) | $(656) | 3.5% |
(1) During the nine months ended September 30, 2023, non-cash addbacks were primarily comprised of non-cash rent of $121 and bad debt write off, net of recovery, of $31. During the nine months ended September 30, 2022, non-cash addbacks were primarily comprised of net credit losses of $402 and non-cash rent of $180.
(2) Practice acquisition-related costs were comprised of consulting and legal fees incurred to perform due diligence, execute, and integrate acquisitions of various oncology practices.
(3) Deferred consideration payments for practice acquisitions that are contingent upon the seller’s future employment at the Company.
(4) Consulting and legal fees were comprised of a subset of the Company’s total consulting and legal fees, and related to certain advisory projects during the nine months ended September 30, 2023. During the nine months ended September 30, 2022, these fees related to advisory projects, software implementations, and legal fees for debt financing and predecessor litigation matters.
(5) Infrastructure and workforce costs were comprised primarily of recruiting expenses to build out corporate infrastructure of $1,593 and $2,429, software implementation fees of $89 and $88, severance expenses resulting from cost rationalization programs of $898 and $203, and temporary labor of $1,217 and $1,105 during the nine months ended September 30, 2023 and 2022, respectively.
(6) Transaction costs incurred during the nine months ended September 30, 2023 were comprised of consulting, legal, administrative and regulatory fees associated with share repurchases and one practice acquisition.
Liquidity and Capital Resources
General
To date, the Company has financed its operations principally through debt facilities, issuances of equity securities and payments received from various payors. As of September 30, 2023, the Company had $27,535 of cash and cash equivalents, current marketable securities of $59,877, and noncurrent marketable securities of $0.
The Company expects to incur operating losses and generate negative cash flows from operations for the foreseeable future due to the investments management intends to continue to make in expanding operations and sales and marketing and due to additional general and administrative expenses management expects to incur in connection with operating as a public company. As a result, the Company may require additional capital resources to execute strategic initiatives to grow the business.
Management believes that the cash on hand and investments in marketable securities will be sufficient to fund the Company's operating and capital needs for at least the next 12 months. Management's assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties. The Company's actual results could vary because of, and its future capital requirements will depend on, many factors, including our growth rate, the timing and extent of spending to open or acquire new clinics and expand into new markets and the expansion of sales and marketing activities. The Company may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. The Company has based this estimate on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than management currently expects. The Company may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, the Company may not be able to raise it on terms acceptable to management or at all. If unable to raise additional capital when desired, or if the Company cannot expand operations or otherwise capitalize on business opportunities because the Company's lack of sufficient capital, the Company's business, results of operations, and financial condition would be adversely affected.
Outside of the aforementioned, and any routine transactions made in the ordinary course of business, there have been no significant changes to our material cash requirements as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.
Cash Flows
The following table presents a summary of the Company's consolidated cash flows from operating, investing, and financing activities for the periods indicated.
(dollars in thousands)
| Nine Months Ended September 30, 2023 | 2022 | Change $% | ||
|---|---|---|---|---|
| Net cash and cash equivalents used in operating activities | $(32,422) | $(47,759) | $15,337 | 32% |
| Net cash and cash equivalents provided by (used in) investing activities | 51,013 | (99,043) | 150,056 | 152% |
| Net cash and cash equivalents provided by (used in) financing activities | (5,066) | 93,053 | (98,119) | (105)% |
| Net increase (decrease) in cash and cash equivalents | $13,525 | $(53,749) | $67,274 | (125)% |
| Cash and cash equivalents at beginning of period | 14,010 | 115,174 | (101,164) | (88)% |
| Cash and cash equivalents at end of period | $27,535 | $61,425 | $(33,890) | (55)% |
Operating Activities
Significant changes impacting net cash, cash equivalents, and restricted cash used in operating activities for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 were as follows:
- Net loss of $64,314 for the nine months ended September 30, 2023 compared to net income of $11,159 for the nine months ended September 30, 2022, primarily as the result of goodwill impairment of $16,867 for the nine months ended September 30, 2023 that did not occur the prior year, and a decrease of $66,892 in the gain related to the change in fair value of liabilities compared to the prior year;
- Share based compensation for the nine months ended September 30, 2023 decreased by $7,882 compared to the nine months ended September 30, 2022;
- Cash used by accounts receivable decreased $6,558 for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 due to the growth in the Company's business;
- Cash provided by accounts payable, accrued expenses and income taxes payable increased $5,795 for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 primarily due to an increase in vendor payables due to the growth in the Company's business; and
- Cash provided by prepaid and other current assets decreased $817 for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 primarily due to the amortization of the D&O policy during 2023 and costs incurred in association with the SPAC transaction during 2022 that were deferred until the transaction closed.
Investing Activities
Net cash provided by investing activities increased $150,056 for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 due to sales of marketable securities of $68,702, and purchases of $77,719 that did not occur in the current period.
Financing Activities
Net cash used in financing activities decreased $98,119 for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022 primarily due to $110,000 debt issuance that did not occur in the current period offset by $7,981 decrease in stock repurchase.
JOBS Act
The Company qualifies as an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and has elected to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company that is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Critical Accounting Policies
The Company prepares its financial statements in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"), which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates under different assumptions or conditions.
Leases
On January 1, 2022, the Company adopted ASU 2016-02, Leases, with various amendments issued in 2018 and 2019 (collectively, “ASC 842”) using the modified retrospective approach, for leases that existed on January 1, 2022. ASC 842 requires lessees to recognize assets and liabilities for most leases. The Company evaluates whether an arrangement is or contains a lease at contract inception. A lease exists when a contract conveys to the customer the right to control the use of an identified asset for a period of time in exchange for consideration. Upon lease commencement, the date on which a lessor makes the underlying asset available to the Company for use, the Company classifies the lease as either an operating or finance lease. The Company applied certain practical expedients permitted under the transition guidance, including the package of practical expedients, which permits the Company not to reassess its prior conclusions related to lease identification, lease classification, and initial direct costs capitalization. The Company solely acts as a lessee and its leases primarily consist of operating leases for its real estate in the states in which the Company operates. The Company has other operating or financing leases for various clinical and non-clinical equipment.
Generally, upon the commencement of a lease, the Company will record a right-of-use (“ROU”) asset and lease liability. An ROU asset represents the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease liabilities are measured at the present value of the remaining, fixed lease payments at lease commencement. The Company uses its incremental borrowing rate, based on the information available at the later of adoption, inception, or modification in determining the present value of lease payments.
ROU assets are measured at an amount equal to the initial lease liability, plus any prepaid lease payments (less any incentives received) and initial direct costs, at the lease commencement date. The Company has elected to account for lease and non-lease components as a single lease component for all underlying classes of assets. As a result, the fixed payments that would otherwise be allocable to the non-lease components are accounted for as lease payments and included in the measurement of the Company’s right-of-use asset and lease liability.
Lease arrangements with an initial term of 12 months or less are considered short-term leases and are not recorded on the balance sheet. The short-term lease payments are recognized as an expense on a straight-line basis over the lease term. The lease term includes any period covered by renewal options available that the Company is reasonably certain to exercise and any options to terminate the lease that the Company is not reasonably certain to exercise.
Variable Interest Entities
The Company consolidates entities for which it has a variable interest and is determined to be the primary beneficiary. The Company holds variable interests in the TOI PCs, comprised of TOI CA, TOI FL, and TOI TX all of which the Company cannot legally own due to jurisdictional laws governing the corporate practice of medicine. The TOI PCs employ physicians and other clinicians in order to provide professional services to patients of our managed clinics, and under substantially similar MSAs, we serve as the exclusive manager and administrator of the TOI PCs’ non-medical functions and services. The TOI PCs are considered variable interest entities (“VIEs”) as they do not have sufficient equity to finance their activities without additional financial support from the Company. An enterprise having a controlling financial interest in a VIE must consolidate the VIE if it has both power and benefits — that is, it has (1) the power to direct the activities of a VIE that most significantly impacts the VIE’s economic performance (power), and (2) the obligation to absorb the losses of the VIE that potentially could be significant to the VIE or the right to receive benefits from the VIE that potentially could be significant to the VIE (benefits). The Company has the power to control all financial activities of the TOI PCs, the rights to receive substantially all benefits from the VIEs, and consequently consolidates the TOI PCs. Revenues, expenses, and income from the TOI PCs are included in the consolidated amounts as presented on the Condensed Consolidated Statements of Operations.
Segment Reporting
The Company presents the financial statements by segment in accordance with the relevant accounting literature to provide investors with transparency into how the chief operating decision maker (“CODM”) manages the business. The Company's CODM is our Chief Executive Officer. The CODM reviews financial information and allocates resources across three operating segments: dispensary, patient care, and clinical trials & other.
Revenue Recognition
The Company recognizes consolidated revenue based upon the principle of the transfer of control of our goods and services to customers in an amount that reflects the consideration to which it expects to be entitled. This principle is achieved through applying the following five-step approach:
1. Identification of the contract, or contracts, with a customer.
2. Identification of the performance obligations in the contract.
3. Determination of the transaction price.
4. Allocation of the transaction price to the performance obligations in the contract.
5. Recognition of revenue when, or as, the entity satisfies a performance obligation.
Consolidated revenue primarily consists of capitation revenue, fee-for-service (FFS) revenue, dispensary revenue, and clinical trials revenue. Revenue is recognized in the period in which services are rendered or the period in which the TOI PCs are obligated to provide services. The form of billing and related risk of collection for such services may vary by type of revenue and the payor. The following paragraphs provide a summary of the principal forms of billing arrangements and how revenue is recognized for each.
Capitation
Capitation contracts have a single performance obligation that is a stand ready obligation to perform specified healthcare services to the population of enrolled members and constitutes a series for the provision of managed healthcare services for the term of the contract, which is deemed to be one month since the mix of patient-customers can and do change month over month. The transaction price for capitation contracts is variable as it primarily includes PMPM fees associated with unspecified membership that fluctuates throughout the term of the contract. Further, we adjust the transaction price for capitation deductions based on historical experience. Revenue is recognized in the month services are rendered on the basis of the transaction price established at that time. If subsequent information resolves uncertainties related to the transaction price, adjustments will be recognized in the period they are resolved. When payment has been received but services have not yet been rendered, the payment is recognized as a contract liability.
Fee For Service
FFS revenue consists of fees for medical services actually provided to patients. These medical services are distinct since the patient can benefit from the medical services on their own. Each service constitutes a single performance obligation for which the patient accepts and receives the benefit of the medical services as they are performed.
The transaction price from FFS arrangements is variable in nature because fees are based on patient encounters, credits due to patients, and reimbursement of provider costs, all of which can vary from period to period. The Company estimates the transaction price using the most likely methodology and amounts are only included in the net transaction price to the extent that it is probable that a significant reversal of cumulative revenue will not occur once any uncertainty is resolved. As a practical expedient, the Company adopted a portfolio approach to determine the transaction price for the medical services provided under FFS arrangements. Under this approach, the Company bifurcated the types of services provided and grouped health plans with similar fees and negotiated payment rates.
At these levels, portfolios share the characteristics conducive to ensuring that the results do not materially differ from the standard applied to individual patient contracts related to each medical service provided.
Revenue is recorded on the date the services are rendered based on the information known at the time of entering of such information into our billing systems as well as an estimate of the revenue associated with medical services. When the performance obligation is not satisfied, the billing is recognized as a contract liability.
Dispensary
Dispensed prescriptions that are filled and delivered to the patient are considered a distinct performance obligation. The transaction price for the prescriptions is based on fee schedules set by PBMs and other third-party payors. The fee schedule is often subject to DIR fees, which are based primarily on pre-established metrics. DIR fees may be assessed in periods after payments are received against future payments. The Company estimates DIR fees to arrive at the transaction price for prescriptions. Revenue is recognized based on the transaction at the time the patient takes possession of the oral drug.
Clinical Research & Other
Clinical research contracts represent a single, integrated set of research activities and thus are a single performance obligation. The performance obligation is satisfied over time as the output is captured in data and documentation that is available for the customer to consume over the course of arrangement and furthers progress of the clinical trial. The Company has elected to recognize revenue for clinical trials using the ‘as-invoiced’ practical expedient. The customer is invoiced periodically based on the progress of the trial such that each invoice captures the revenue earned to date based on the state of the trial as established under contract with the customer.
Direct Costs of Sales
Direct cost of sales primarily consists of wages paid to clinical personnel and other health professionals, oral and IV drug costs, and other medical supplies used to provide patient care. Costs for clinical personnel wages are expensed as incurred and costs for inventory and medical supplies are expensed when used, generally by applying the specific identification method.
Goodwill and Intangible Assets
The Company accounts for goodwill and intangible assets under Accounting Standards Codification Topic No. 350, *Goodwill and Other (“*ASC 350”). Goodwill represents the excess of the fair value of the consideration conveyed in acquisition over the fair value of net assets acquired.
Goodwill is not amortized but is required to be evaluated for impairment at the same time every year. The Company performs annual testing of impairment for goodwill in the fourth quarter of each year or earlier if potential impairment indicators exist. When impairment indicators are identified, the Company compares the reporting unit’s fair value to its carrying amount, including goodwill. An impairment loss is recognized as the difference, if any, between the reporting unit’s carrying amount and its fair value to the extent the difference does not exceed the total amount of goodwill allocated to the reporting unit.
Under ASC 350, finite-lived intangible assets are stated at acquisition-date fair value. Intangible assets are amortized using the straight-line method.
Finite-lived intangible assets are stated at acquisition-date fair value. Intangible assets are amortized using the straight-line method. Finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When circumstances indicate that recoverability may be impaired, the Company assesses its ability to recover the carrying value of the asset group from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and carrying value. Fair value is determined based on appropriate valuation techniques.
Market risk
As filed, 2,455 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure due to potential changes in inflation or interest rates. We do not hold financial instruments for trading purposes.
Interest Rate Risk
We held cash and cash equivalents of $27,535, current marketable securities of $59,877, and noncurrent marketable securities of $0 as of September 30, 2023, consisting of bank deposits. Such interest-earning instruments carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation. We believe that we do not have any material exposure to changes in the fair value of these assets as a results of changes in interest rates due to the short-term nature of our cash and cash equivalents.
Inflation Risk
Recently, inflation has increased throughout the U.S. economy. Inflation can adversely affect us by increasing the costs of drugs, clinical trials and research, administration and other costs of doing business. We may experience increases in the prices of labor and other costs of doing business. In an inflationary environment, cost increases may outpace our expectations, causing us to use our cash and other liquid assets faster than forecasted. If this happens, we may need to raise additional capital to fund our operations, which may not be available in sufficient amounts or on reasonable terms, if at all, sooner than expected.
Impairment Risk
Impairment risk refers to the risk that the Company will write down a material amount of its goodwill or intangible assets. This risk is assessed at least annually in the fourth quarter each year when the Company performs its impairment testing. To the extent that, among other factors, (i) there is underperformance in one or more reporting units (ii) a potential recession further disrupts the economic environment or (iii) interest rates continue to rise in response to persistent inflation, the fair value of one or more of the reporting units could fall below their carrying value, resulting in a goodwill or intangible impairment charge.
For the three and nine months ended September 30, 2023, the Company recognized an impairment charge of $0 and $16,867, respectively to write-down the carrying value of goodwill related to patient services and clinical trials & other in excess of the fair value.
Controls and procedures
As filed, 4,425 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that the information relating to our Company, including our consolidated subsidiaries, that are required to be disclosed in our SEC reports, is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow for timely decisions regarding required disclosure. We conducted an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2023. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2023, our disclosure controls and procedures were not effective due to a material weakness in our internal control over financial reporting, as described below. Notwithstanding the identified material weakness noted below, management, including our Chief Executive Officer and Chief Financial Officer, who serve as our principal executive officer and principal financial officer, respectively, believe the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly represent, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with GAAP.
Material Weakness in Internal Controls Over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
As of September 30, 2023, we have identified a material weakness in our internal control over financial reporting of complex accounting transactions, as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.
During the third quarter of 2023, our management continued to execute against the remediation plan under the oversight of the Audit Committee. This involves hiring and training additional qualified personnel, performing detailed risk assessments in key process areas to identify risks of material misstatement, further documenting and implementing control procedures to address the identified risk of material misstatement, and implementing monitoring activities over such control procedures.
Changes in Internal Control over Financial Reporting
Except for the changes in the Company's internal control that have been made toward remediating the material weakness noted above, there were no changes in the Company’s internal control over financial reporting that occurred during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations on Effectiveness of Disclosure Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management, including the Chief Executive Officer and Chief Financial Officer, recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Risk factors
As filed, 611 characters, with its headings, lists and tables. Extracted from the main document; charts and exhibits are in the original on sec.gov.
There have been no material changes to the risk factors previously described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and in Part II Item 1A of our Quarterly Report for the three months ended March 31, 2023. These risk factors describe some of the assumptions, risks, uncertainties and other factors that could adversely affect our business or that could otherwise result in changes that differ materially from our expectations. We may disclose changes to such risk factors or disclose additional risk factors from time to time in our future filings with the SEC.
Figures reported in this filing
Standardized line items from the XBRL in this filing, for the period ended 2023-09-30. Comparative periods it repeats are left out.
| Line item | Period | Value | XBRL concept |
|---|---|---|---|
| Revenue | 3 months2023-07-01 to 2023-09-30 | $82.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months2023-01-01 to 2023-09-30 | $238.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months2023-07-01 to 2023-09-30 | $28.2m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months2023-01-01 to 2023-09-30 | $85.8m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months2023-07-01 to 2023-09-30 | −$13.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months2023-01-01 to 2023-09-30 | −$61.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months2023-07-01 to 2023-09-30 | $135.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months2023-01-01 to 2023-09-30 | $278.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months2023-07-01 to 2023-09-30 | −$17.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months2023-01-01 to 2023-09-30 | −$64.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months2023-07-01 to 2023-09-30 | −$0.19 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months2023-01-01 to 2023-09-30 | −$0.71 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months2023-07-01 to 2023-09-30 | −$0.19 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months2023-01-01 to 2023-09-30 | −$0.71 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months2023-07-01 to 2023-09-30 | 73,469,101 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months2023-01-01 to 2023-09-30 | 73,679,454 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months2023-01-01 to 2023-09-30 | −$32.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months2023-01-01 to 2023-09-30 | $3.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months2023-01-01 to 2023-09-30 | $1.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Current assets | At period end2023-09-30 | $152.7m | us-gaap:AssetsCurrent |
| Total assets | At period end2023-09-30 | $218.4m | us-gaap:Assets |
| Current liabilities | At period end2023-09-30 | $32.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | At period end2023-09-30 | $146.5m | us-gaap:Liabilities |
| Long-term debt | At period end2023-09-30 | $85.3m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | At period end2023-09-30 | $71.8m | us-gaap:StockholdersEquity |
Source: SEC EDGAR, the filing index for accession 0001628280-23-037896. Last ingested by Listed: Oct 24, 2026, 15:07 ET. Listed shows no prices and gives no investment advice.